Assess the benefits and costs of using swap arrangements with financial futures contracts as a tool for managing the companies risk.© BrainMass Inc. brainmass.com October 16, 2018, 4:16 pm ad1c9bdddf
The problem wants you to understand what a swap arrangement is and how it helps a company to reduce risk. Swap arrangement means that the company enters into two transactions today one for buying and one for selling at the futures rates available today. The purpose is that if there is a fluctuation in the price in future then the profit cancels out the loss and the net result is that the company manages to get its deal without undue loss or profit from market fluctuation. Consider the following example. A company is starting a project now, which will take four years to complete; it needs a loan of one billion dollars at the end of one year. However it has to complete its tender form today and determine the cost of the project today. Now during the course of two years interest rates may fluctuate and either lead to unexpected profits or unexpected losses. The company is not in the business of ...
Managing Exchange Rate Risk
Multinational corporations need to carefully plan for various risks, including currency risks and the threat of currency crisis in the international market. The currency crisis in Asia was devastating for many corporations. Therefore, it is important for the multinational corporations to prepare themselves for the currency crisis in the global market.
To complete the Module 2 Case Assignment, please choose FedEx Corporation (http://fedex.com ; http://www.fedex.com/us/investorrelations/financialinfo/goals/) that is listed and traded on the New York Stock Exchange (NYSE: Symbol - FDX).
Read the information in the background material, look for more information, and then write a 3 to 4 page paper answering the following questions:
To what extent can exchange rate risks impact on the business operations of the FedEx Corporation? Please explain your reasoning.
Are there any options that the financial managers of the FedEx Corporation can use to manage exchange rate risk?
Are there any advantages and disadvantages of the different exchange rate risk management options that you suggested to the financial managers of the FedEx Corporation?View Full Posting Details